First-of-its-kind Colorado law regulates AI in employment

Published: May 20, 2024 | by Michael Cardman, Senior Legal Editor at Brightmine

Colorado has enacted new requirements for employers that use artificial intelligence (AI) in hiring, firing and other business decisions.

SB24-20 — which was signed into law on May 17 by Gov. Jared Polis and takes effect February 1, 2026 — requires businesses that use AI to make consequential decisions to exercise reasonable care to protect Colorado residents from discrimination on the basis of race, sex, age and other protected characteristics. Failure to do so will be considered an unfair trade practice under Colorado law.

Businesses will be protected by a rebuttable presumption that they exercised reasonable care as long as they take certain actions, including:

• Annually reviewing the AI to ensure it is not causing discrimination, and disclosing any discrimination to the state attorney general within 90 days of discovering it.
• Implementing a risk-management policy and program for the AI.
• Assessing the impact of the AI at least annually and 90 days after any substantial modification.
• Notifying residents (which presumably includes employees and job applicants) of any consequential decisions made by the AI.
• Providing residents the opportunity to correct data used to drive decisions made by the AI.

The law defines consequential decision broadly as any decision that “has a material legal or similarly significant effect on the provision or denial to any consumer of, or the cost or terms of” employment or an employment opportunity, as well as certain goods and services like housing, insurance and more.

It remains to be seen exactly what employment practices could be covered under this definition. The law directs the attorney general to promulgate rules that may help to interpret its scope.

Fears of a patchwork approach

The R Street Institute, a think tank that conducts policy research “in support of free markets and limited, effective government,” said it expects SB24-305 will inspire copycat bills in other states. So far, more than 700 bills have been introduced in 45 state legislatures, according to the think tank’s research.

In a signing statement, Polis warned that a patchwork of state laws will “tamper innovation and deter competition in an open market.” He called for a “cohesive federal approach” to preempt various state laws and establish a level playing field across the nation.

So far, the federal government has issued only nonbinding guidance – including AI principles for employers released last week by the US Department of Labor (DOL) and a joint statement that several federal agencies released last year detailing a coordinated approach to address bias and discrimination in automated systems.